A well-run business seeks to maximize its earnings by harvesting several income streams from one asset, but that only works if end-users see value in the multitude of products coming at them from one source. Can this strategy be applied to ecosystem services to save the most ecologically valuable pieces of land?

A well-run business seeks to maximize its earnings by harvesting several income streams from one asset, but that only works if end-users see value in the multitude of products coming at them from one source. Can this strategy be applied to ecosystem services to save the most ecologically valuable pieces of land? Join the Ecosystem Commons debate before 24 August.

The Discussion

Pilot programs for ecosystem services payments and markets are beginning to consider whether to allow stacking—where landowners combine multiple market or mitigation payments for a single management activity on a single property—and if so, how these payments should be handled.

In theory stacking could provide multiple benefits, including increased revenues for landowners who provide services; better ecosystem services projects than are possible with a single payment; and management across multiple services (a move toward optimizing rather than maximizing).

A panel I moderated at the July Ecosystem Markets Conference in Madison, Wisconsin, explored some of the early stacking efforts. The Willamette Partnership’s Counting on the Environment program has developed an approach that allows grouping projects to sell to multiple markets—essentially when one credit type is sold, the other credit types are reduced by a proportionate amount. The Ohio River Basin Trading Project is beginning work to assess the potential benefits of stacking water quality credits with carbon credits, and the new city of Damascus, Oregon is focused on allowing conservation easements to sell services in ecosystem services markets and stack value.

While there have been assessments of stacking that consider the economic impacts (Woodward 2010), risks to ecosystem service outcomes (Cooley and Olander 2011), and practitioner views on stacking (Fox 2010); we don’t have good examples of the benefits. Where would stacking result in greater participation and more ecosystem services benefits? When would stacking allow a different type of project—one that generates greater benefits—to proceed? What do these examples look like?

Author bio:

Lydia Olander is the Director of the Ecosystem Services Program at Duke University’s Nicholas Institute for Environmental Policy Solutions. She is helping to develop Duke’s expanding initiative on ecosystem services, coordinating Duke’s Ecosystem Services Working Group, helping to lead the institute’s program on greenhouse gas offsets, directs the Technical Working Group on Agricultural Greenhouse Gases and has previously worked on designing policy for reduced emissions from deforestation and degradation (REDD). She spent a year as AAAS Congressional Science and Technology Fellow working with Sen. Joseph Lieberman on environmental and energy issues. She received her doctorate from Stanford University, where she studied nutrient cycling in tropical forests, and has a masters in forest science from Yale University. She has published in professional journals, including Ecosystems, Biogeochemistry, Soil Biology and Biochemistry, Forest Ecology and Management, Earth Interactions, Environmental Research Letters, and Global Environmental Politics.

Comments

These are great questions. For me, there are two goals for stacking–1) increase landowner participation, and 2) incentivize more wholistic/better restoration and conservation.

For the first, economic goal, this seems most important where you have high-value crops or lands where ecosystem services are having a hard time competing with other land uses (e.g. urban development). I think we need to ask which landowner demographic we are after. If we want to compete with urban development, we may never win. If we want to target those 70% of landowners that want to stay in farming, forestry, or ranching and just need to break even to stay on the land, then I think we can get a lot done. When we think about stacking, we should be thinking about stacking to get the next big pulse of participation (ie 30% of landowners) rather than all landowners.

For the second goal, I’m not sure you need to stack to get here. The Willamette Partnership bet that if you give landowners options of selling multiple, but not quite stacked credits, then that additional set of options would lead to better restoration. We have to see if that plays out to be true or not. We also put eligibility requirements in place. If you want a credit for reducing temperature, then you can’t just plant trees–you need to plant a healthy forest with an understory and a diversity of plant species.

So, I think we should be looking at the multiple places in program design where we can get to our goals. Stacking is one lever. We need to balance the stacking debate with the need to get high levels of certainty into these programs. We’d love to see a better approach, so I really look forward to seeing the examples. Thanks for posting this Lydia!

If we view ecoservices in the broad definition to include grain, lumber, carbon sequestration, water quality, etc. then ecoservies are already stacked. Within fields on our farm I produce corn grain, corn stover, carbon seq, water quality, and habitat – but only (the first) two of those are value-stacked within the economy and government systems. I am producing a larger stack of ecoservices than the value stream stack that returns to the land. So if society, government, industry, retail, NGOs, etc send out a market signal for the demand of more WQ, Cseq, etc. but do not pay for all the values, then I doubt many land managers will respond to a weak and (perceived) unfair market signal. If ecoservices are real, then the market has to recognize them as real if they want them produced and the data that they were produced. I think part of the issue is that the major early players in the ecoservice market are concerned with paying for ecoservices. The mindset of regulatory policy makers is to direct people to do something without compensation and when this mindset moves into the market place is only wants to ante up a little – perhaps thinking the not being regulated has some innate value that should be universally recognized. But once the market gets a hold of value, it has no preconceived notions on what should happen, but searches for the value and how people should be compensated for that value. Now to let the demanders off the hook somewhat, I will add that the values associated with producing these new ecoservices do not have to be all direct monetary payments, but other economic values such as market access, participatory benefits, insurance premium reductions, tax breaks, regulatory compliance and resource credits. But I think the bottom line is that if an activity produces an outcomes that has value, it needs to be recognized by the market and the market will find its price. By placing these new ecoservice commodities in a box with restrictive parameters related to permanancy, duplicity and additionality will undervalue these ecoservices relative to other unrestricted commodities to the point that we will only experience bilateral trades within isolated regional markets that are heavily subsidized by governments and/or non-profit organizations.

I have been marinating on the “bundle of sticks” concept with regard to additionality.

First, let me digress and explain how I’m understanding stacking vs additionality as Lydia has framed this question. It seems like stacking MIGHT result in additional ecoservice preservation, and especially should in the aggregate as it makes participation in ecosystem markets a more attractive option than other land uses. However, for an individual land, stacking might NOT result in additional services, just more funding for the preservation of the same tract as it provides multiple ecoservices. Am I getting this right?

Anyway, back to the bundle of sticks: The validity of additionality and paying for multiple services on the same tract rests to some extent on how the ecoservices being transferred are defined. That is, if aservice is defined very broadly or inclusively (for example, x feet of riparian buffer), then one has to be careful not to re-sell services for those same lands that are already included in THAT buffer bundle of sticks (in our area, this would include nitrogen processing, mostly, but in other areas temperature regulation or TSS might be included in “riparian buffer” transactions).

Unfortunately, this seems to be leading me to conclude that for the participants in the marketplace, it’s better to define ecoservices narrowly, to maximize future opportunities for additional payments (ecoservices for which payments are not yet available). As someone with a working knowledge of ecology and the uncertainties of restoration practices, however, I question whether one-off ecoservice transactions can really deliver and add up to preservation of functioning ecosystems.

As noted above, ecosystem services by their very nature are stacked. The challenge here is to disaggregate the services in ways that translate into some monetized value so that it fits into the prevailing economic system. We probably do not need to be too concerned about double-counting from an ecological perspective, but economists might have a different perspective.

One very interesting movement that is making positive headway is the Salmon Safe program (http://www.salmonsafe.org/). At the SETAC meetings in Portland (November 2010), in a session on supply-side sustainability, we learned that small wineries have been adopting the land management practicies and undergoing audits to be certified under the Salmon Safe label. There does not appear to be a strong correlation between having the label and direct monetary benefit in terms of increased sales or increased pricing — rather, the motivation is “to do the right thing” in terms of managing lands and the connections to waterways. If this program is representative of other opportunities, then I think we can be successful in promoting wise stewardship for the sake of wise stewardship even when there is not a direct realization of profit in doing so.